Warner Capital Pty Ltd v Shazbot Pty Ltd

Warner Capital Pty Ltd (the appellant) and Shazbot Pty Ltd (the respondent) were parties to a dispute concerning the valuation of uncompleted insolvency administrations as part of a partnership account. The matter came before the Court of Appeal of the Supreme Court of New South Wales.

The central legal issue before the Court was how to value the uncompleted insolvency administrations for the purpose of taking the partnership accounts. This required determining whether a hypothetical valuation of work in progress and residual goodwill was permissible, and if so, how such a valuation should be conducted, particularly in the absence of comparable transactions. The Court also had to consider whether a hypothetical vendor would offer a discount to a hypothetical purchaser to acquire the book of administrations, and conversely, whether an insolvency practitioner could lawfully require or accept such a discount.

The Court reasoned that the valuation of the uncompleted administrations required a hypothetical approach, acknowledging that a lack of comparable transactions did not render such a valuation impossible. It held that a hypothetical vendor would not offer a discount to a hypothetical purchaser to acquire the book of administrations. The Court further determined that it was impermissible for an insolvency practitioner to require or accept a discount to take on such a book, as an insolvency practitioner retained the right to resign or seek leave to resign from unprofitable administrations.

The appeal was dismissed with costs.